The VAT gap between what is supposed to be collected and what is actually collected by the state is 36 percent in Romania, while in Bulgaria it’s only 13.56 percent. If we could collect at the level of our southern neighbors, we could build a highway between Comarnic and Brasov every year, according to Ionut Dumitru, the president of the Fiscal Council.
Speaking at the annual conference organized by the Association of Financial Analysts in Romania, Ionut Dumitru pointed out that Romania has too many problems in terms of tax collection.
”There is a VAT gap of 13.56 percent in Bulgaria, while we have a 36 percent gap. If we could collect as much as Bulgaria, which should not be very difficult, there would a plus of EUR 3.8 billion in the state budget, the equivalent of a big highway every year. If we would collect VAT as it is in Bulgaria, we could build a long motorway, like Comarnic – Brasov, every year. The differences are huge between us and the Bulgarians. For example, they collect 9.3 percent of GDP from VAT, while we collect only 6.2 percent, as standard rates are similar: their VAT is 20 percent, our is 19 percent. The differences are quite big in excises too, as they collect 4.9 of GDP, while we collect only 3.2 percent. And our excise duties are higher than theirs,” said Dumitru.
He noted that a higher level of collection would be achieved with a more efficient IT system for ANAF.
According to the Fiscal Council president, the dynamic of the budget expenditures structure doesn’t favour long-term economic growth, with a rising share of non-productive spending and a sharp drop in productive spending, such as investments.
Thus, tax revenues are at historical minimum, at 25.8 percent of GDP, while the European average is 40 percent of GDP.
Wage expenditures increased to historic highs in 2018, to 10.8 percent of GDP, while the highest level previously reached was 10.4 percent of GDP, in 2009.
Public investment has fallen sharply lately, to 2.6 percent in 2017, while the European average is 2.7 percent.
“Our public investments are at the level we recorded before joining the European Union, when we did it without any European funds, and this cannot be sustainable,” added Dumitru.